N.E. Governors Change Course On Paying For Energy Projects

HARTFORD — The five New England governors at a closed-door energy meeting Thursday updated their agreement to pursue major investments in natural gas pipelines and transmission wires.

Investments in the billions of dollars are needed, they say, to reduce New England's electricity prices, which, outside of Hawaii, are the highest in the United States.

The agreement released Thursday largely mirrors what New England's governors signed on to in December 2013, but the new language leaves states far more room to opt out of specific projects than the previous agreement.

It's as if the governors had agreed on family-style meals, but now everyone's ordering a la carte.

The shift from a collective approach to a more piecemeal one reflects the political difficulties of finding consensus on how to address what they have called "an energy crisis." It also potentially changes how the costs and benefits of these large projects are allocated to the states.

Vermont and New Hampshire, for example, did not commit Thursday to share in the costs of a new pipeline or electric transmission project. In this case, though, the two states would still benefit from gas or electric projects without sharing in the costs.

Connecticut and Massachusetts are, in different ways, exploring how to make these large investments in pipes and wires. And Maine and Rhode Island have existing authority to fund new projects.

Gov. Dannel P. Malloy, who convened the energy summit Thursday and was the force behind the governors' initial agreement, said: "The better way for us to do what we want to do is work out the things, and get authority to do the things, together that we would otherwise individually want to do."

New Hampshire Gov. Maggie Hassan did not attend the event because of the funeral of a colleague. Instead, she sent to the meeting Meredith Hatfield, director of the state Office of Energy and Planning.

New England has increased its reliance on natural gas for heating and power generation over the past decade, while there has been little if any new pipeline construction to supply the region's increased demand for the fuel.

This has resulted in huge price spikes for electricity in the winter months when competition for natural gas is most fierce, an issue that the governors have focused on and want to alleviate by financing the construction of new pipelines.

"The marketplace itself has not resolved this issue," Malloy said. "And by the way, if I just made an extra $7.5 billion over the past two years and I was the market, I'm not sure I would want to resolve this issue."

Nonetheless, pipelines are being built in the region, some with regulatory approval in hand and others waiting for action from the governors before making a commitment. Dan Dolan, president of the New England Power Generators Association, said that although there has been a mismatch between supply and demand, the market is responding.

"We are seeing an unprecedented level of interest for new entrants to come into the market, a combination of new power plants, new transmission to connect new power plants, and pipelines to bring natural gas into the market," Dolan said.

Eversource Energy, Spectra Energy, and National Grid have jointly proposed a major pipeline expansion, as has Kinder Morgan, the parent company of the Tennessee Gas Pipeline, which feeds natural gas into New England.

Pipeline Protests

The idea to tackle high electricity prices with more natural gas pipelines brought dozens of protesters to Hartford for the governors' meeting. To them, the billions in support for fossil fuel infrastructure would be better spent on clean energy technologies, like solar and wind.

To Ariel Elan of Montague, Mass., the potential savings on her electric bill promised by the supporters of new pipeline infrastructure is a low priority compared to the climate change costs that she has already seen in higher food and insurance costs.

Elan, who stood outside the Connecticut Convention Center during the governors' meeting, said that New England leaders should focus their efforts on renewable energy, which would "slow down the climate-driven costs of everything else I pay for in my life."

Boston resident David Ludlow stood up during a morning session open to the public and read a statement, which began, "The governors are courting climate catastrophe by bypassing renewable energy with fracked gas. They are bringing in three times the amount of gas we need. Exports will drive prices up, not bring prices down."

More than 40 environmental groups signed a statement opposing the governors' push to build a new gas pipeline.

A Shifted Approach

After first proposing in December 2013 to work together on New England's infrastructure issues, the governors agreed to "share appropriately" the costs and benefits of the projects. At that point, a leading idea was to pay for the projects with a tariff within the wholesale electricity market. This strategy, which would have required approval from federal energy regulators, would have borne the costs evenly by ratepayers according to how much power each state used.

In the year and a half since, the approach shifted to the states and their electric distribution companies, like Eversource Energy and United Illuminating in Connecticut. Under a plan that the distribution companies proposed, they would finance a pipeline or transmission project and recover the cost of that investment from ratepayers.

A bill in the Connecticut legislature would give the state Department of Energy and Environmental Protection the ability to compel the electric utilities into these contracts. In Massachusetts, regulators are reviewing whether existing state statutes enable the state to also pursue similar contracts.

Malloy said Thursday that he would contact his counterparts in New England if enabling legislation passes in Connecticut. He said the governors would meet again in September.